Briefing highlights
- A look at debt and wealth
- Stocks, loonie, oil at a glance
- Canada’s trade gap narrows
- U.S. shortfall eases sharply
- Renault to aim sights on Fiat Chrysler: report
- Required reading
- Canopy, Seth Rogen team up on cannabis brand
- From today’s Globe and Mail
Debt and wealth
A new study from Statistics Canada shows just how wealthy we are as a nation, but it also highlights how many Canadians are messed up or poor.
The report by principal researcher Guy Gellatly and senior research economist Elizabeth Richards, released this week, comes amid the continuing controversy over income inequality in Canada and is certain to feed into the debate.
Their study illustrates how wealth has increased markedly, and how debt-to-income levels in Victoria, Vancouver and Toronto are out of whack with the rest of Canada.
And, notably, how 8.4 per cent of families have less than $500 in net worth.
Some of the numbers may be a bit out of date, given that they’re taken largely from a 2016 Survey of Financial Security, and, of course, given the change in borrowing habits since interest rates first rose and new mortgage-qualification stress tests came into effect early last year.
But the researchers also took information from other Statistics Canada sources to include the “most up-to-date results,” Ms. Richards said.
The numbers shed light on debt and wealth across Canadian regions and income groups, and show changes over time. And, remember, although our borrowing habits may have cooled along with housing markets, credit levels remain swollen, and the household debt burden elevated.
Among their findings:
Debt
“Debt-to-income levels among Canadian households continued to edge higher in the years following the recession, before rising sharply in 2015 and 2016 when income growth slowed as the economy adjusted to lower oil prices,” Mr. Gellatly and Ms. Richards said.
“Currently, Canadian debt-to-income levels are over 20 per cent higher than in late 2007.”
The debt-to-income ratios of households in Victoria, Vancouver and Toronto stood at 240 per cent, 230 per cent and 210 per cent, respectively, in 2016, topping the national average of 165 per cent.
For purposes of comparison, those in Moncton, London and Fredericton, at 106 per cent, 113 per cent and 119 per cent, trailed the average.
Debt to after-tax family income,
selected census metropolitan areas
Per cent
1999
2016
0
50
100
150
200
250
300%
Quebec
Montreal
Ottawa-Gatineau
Toronto
Hamilton
Winnipeg
Calgary
Edmonton
Vancouver
Victoria
Canada
THE GLOBE AND MAIL, SOURCE: STATISTICS CANADA
Debt to after-tax family income,
selected census metropolitan areas
Per cent
1999
2016
0
50
100
150
200
250
300%
Quebec
Montreal
Ottawa-Gatineau
Toronto
Hamilton
Winnipeg
Calgary
Edmonton
Vancouver
Victoria
Canada
THE GLOBE AND MAIL, SOURCE: STATISTICS CANADA
Debt to after-tax family income, selected census metropolitan areas
Per cent
1999
2016
0
50
100
150
200
250
300%
Quebec
Montreal
Ottawa-Gatineau
Toronto
Hamilton
Winnipeg
Calgary
Edmonton
Vancouver
Victoria
Canada
THE GLOBE AND MAIL, SOURCE: STATISTICS CANADA
Mortgages are, of course, a big part of overall debt, rising to 80.7 per cent of the total in 2016 from 77.4 per cent in 1999.
“The leverage and wealth estimates reported above highlight the extent to which many lower-income families carry on average both higher debt loads and lower levels of net wealth,” the Statistics Canada researchers said.
Households in the lowest income quintiles in Toronto had a sharp 420 per cent of debt as a proportion of income. In Vancouver, that stood at 400 per cent.
Thus, the study underscores how “it was the poorest households in the nation’s two largest cities that were squeezed the most,” said Bank of Montreal economic analyst Priscilla Thiagamoorthy.
“We suspect the bulk of the debt was likely from student assistance programs, auto loans and credit cards,” she said.
“The good news is that interest-rate hikes are now on pause. And, job gains are a bright spot in the Canadian economy. But, if we see major signs of teetering on that front, the debt burden could become a larger issue.”
The latest numbers from Statistics Canada, for the record, showed household credit market debt-to-disposable income at a seasonally adjusted 178.5 per cent in the fourth quarter, which means we owe $1.79 for each dollar of disposable income.
Wealth
Median net worth surged to $295,000 in 2016 from $144,500 in 1999, driven by families in Toronto and Vancouver, where such net worth rose 121 per cent to $365,100 and 188 per cent to $434,400, respectively.
“Despite significantly higher debt levels, those at the lowest end of the income distribution also generally had lower net worth, particularly compared with those in the higher income quintiles,” Statistics Canada said.
“For example, in Toronto, net worth for families in the lowest income quintile was $9,000 in 2016 compared with $1.2-million for those in the highest income quintile. This finding was generally similar across the country.”
Breaking it down, families in every income quintile chalked up gains in net worth as the values of their assets rose faster than their liabilities.
Median family net worth, Canada and
selected census metropolitan areas
2016 constant dollars, thousands
1999
2016
0
100
200
300
400
$500
Quebec
Montreal
Toronto
Winnipeg
Calgary
Edmonton
Vancouver
Canada
*The 1999 estimate for Quebec City should be interpretated
with caution due to sampling error.
SOURCE: STATISTICS CANADA
Median family net worth, Canada and
selected census metropolitan areas
2016 constant dollars, thousands
1999
2016
0
100
200
300
400
$500
Quebec*
Montreal
Toronto
Winnipeg
Calgary
Edmonton
Vancouver
Canada
*The 1999 estimate for Quebec City should be interpretated with caution
due to sampling error.
SOURCE: STATISTICS CANADA
Median family net worth, Canada and selected census metropolitan areas
2016 constant dollars, thousands
1999
2016
0
50
100
150
200
250
300
350
400
450
$500
Quebec*
Montreal
Toronto
Winnipeg
Calgary
Edmonton
Vancouver
Canada
*The 1999 estimate for Quebec City should be interpretated with caution due to sampling error.
SOURCE: STATISTICS CANADA
Average wealth per family in the bottom quintile rose 88 per cent between 2010 and 2017, to $213,800 from $124,100. Those at the bottom accounted for 5.8 per cent of wealth in the country, up from 4.9 per cent.
And, as they say, the rich got richer, with net worth in the top quintile surging 56 per cent to $1.8-million in 2017 from $1.3-million in 2010. Their share of the wealth actually dipped to 49 per cent from 50.3 per cent.
“Families living in British Columbia and Ontario exhibit higher median wealth than those living in other provinces,” said Mr. Gellatly and Ms. Richards.
“The contribution of housing to real asset growth is more pronounced in Toronto and Vancouver. In these cities, principal residences accounted for over 50 per cent of real asset growth during this period,” they added.
Separately, investment firm Edward Jones this week released survey results that showed 77 per cent of Canada think saving is more important than paying down their debts, at 44 per cent.
Read more
- Half of Canadians say they’re struggling to meet daily expenses: OECD
- Rob Carrick: This is why Canadians are so stressed out about money despite good economic times
- ‘You may not be as rich as you think’: Canadian families face a long road back to financial health
- Tim Shufelt: Canadian household debt to income ratio rises to historical high, Statistics Canada says
- Many Canadians say they’ll have to tap RRSPs, take second mortgages, sell assets as debt burden rises
- ‘The worm is turning’: More Canadians are going broke, defaulting on their debts
- Growing debt loads weighing on growth, opening up vulnerabilities, Bank of Canada deputy warns
Markets at a glance
Read more
Trade gap narrows
Canada’s exporters scored a rare win in January, helping to narrow the country’s trade deficit.
The shortfall eased to $4.2-billion from $4.8-billion in December, Statistics Canada said today, as exports climbed 2.9 per cent to mark the first gain since last July.
Export prices climbed 2 per cent, and volumes 0.9 per cent.
After a string of losses, the agency said, energy exports rose 14 per cent, largely on a hefty jump in oil prices.
Imports, in turn, rose 1.5 per cent to a record level.
“Today’s trade report provides a bit of encouragement,” said Royal Bank of Canada senior economist Josh Nye.
“It’s a good reminder that the energy sector’s near-term difficulties, which weighed on growth toward the end of last year, should be largely transitory. Prices have rebounded this year and output should follow as mandatory curtailments are reduced.”
Read more
- Canada’s trade deficit shrinks slightly in January, still second-highest on record
- U.S. trade deficit narrows sharply in January as exports rebound
Required reading
The Globe and Mail’s Tim Kiladze looks at activist investors, once a noble bunch fighting for the rights of regular shareholders. But now, it’s hard to tell the altruists from the raiders.
Investors found carrying on a business – such as day traders – will now be held legally responsible for any tax owing on income earned in a tax-free savings account, The Globe and Mail’s Clare O’Hara reports.
Renault SA plans to reignite merger discussions with Nissan Motor Co. within a year, and then turn its guns on Fiat Chrysler, the Financial Times reports.
More news
From today’s Globe and Mail
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- Alexandra Posadski, Eric Atkins: Canola prices tumble, farmers scramble to find new buyers amid trade tensions with China
- Susan Krashinsky Robertson: Apple News+ promises digital audiences for struggling publishers – but at what cost?
- David Milstead: Activists nominate five directors to TransAlta board in bid to derail Brookfield investment